Overview of the Industrial Disputes Act 1947

The Industrial Disputes Act 1947 | Overview

• Brief Historical Overview of the Industrial Disputes Act
• Structure, Objectives, and Fundamental Concepts of the ID Act 1947
• Appropriate Government
• Industry
• Workman
• Industrial Dispute

In 1947, the Industrial Disputes Act was passed. It governs industrial disputes, individual disputes, and other contingencies such as retrenchments, lockouts, layoffs, closure et cetera.

Brief Historical Overview of the Industrial Disputes Act

The major legislations which can be examined as a part of the historical overview of the Industrial Disputes Act 1947 (hereinafter referred to as the “ID Act”) are the Employers and Workmen (Disputes) Act 1860 and the Trade Disputes Act 1929. The Act of 1860 was applicable to the construction of public works such as railways, canals, et cetera, and was confined to disputes which related to wages only. Under this legislation, the right to strike was not made available to the workers, and the workers were subjected to criminal prosecution if they breached their contract of employment. The disputes under the 1860 Act were resolved summarily by the Magistrate. This Act was repealed in 1932.[1]

Some progress can be seen in the 1929 Act, where the right to strike of the workers was recognised, however, within restrictions. There were provisions for prior notice to be given by the workers if they were going on strike and were engaged in sectors which were considered to be public utility services. This legislation also provided for the system of conciliation for settling the industrial disputes. This Act underwent many amendments in 1932, 1937, and so on, which widened the scope of trade disputes legislation, and introduced permanent resolution institutions for the speedy and amicable settlement of the disputes.

The Trade Disputes Amendment Act of 1938 provided for the appointment of conciliation officers who had the duty of mediating and promoting settlement. This remained until Rule 81A of the Defence of India Rules 1939 was invoked to overcome the difficulties of the 1929 Act. These rules gave the government emergency powers to regulate industrial disputes, and through these rules, strikes were banned in public utility service sectors, and it was made compulsory to refer industrial disputes for adjudication and settlement.[2]

In 1947, the Industrial Disputes Act was passed. It governs industrial disputes, individual disputes, and other contingencies such as retrenchments, lockouts, layoffs, closure et cetera. It provides for the appointment of conciliation boards, conciliation officers, courts of inquiry, and industrial tribunals. In 1956, the Act was amended to provide for setting up of labour courts and national industrial tribunals. The subject labour comes in the concurrent list in Schedule VII of the Indian Constitution, and therefore, though the Industrial Disputes Act is national legislation, several states have amended the Act to suit their own needs, while some have enacted state legislation also.

Structure, Objectives, and Fundamental Concepts of the ID Act 1947

The ID Act has been divided into seven chapters, which in themselves include multiple sub-chapters in many places and consists of forty Sections. It further has five schedules.

From the preamble of the Act, the objectives of introducing the legislation can be culled out, and these have been clearly spelt out in Dimakuchi Tea Estate Case[3]. These are as follows:

1. Promotion of measures for securing and preserving amity and good relations between employer and employee, through tools like collective bargaining for instance.
2. Investigating and settling industrial disputes. The Act broadly provides for three modes of resolution; one, through investigation, two, through settlement, and three, through adjudication.
3. Preventing illegal strikes and lockouts. This objective becomes even more important in case of public utility services, and elaborate laws have been laid down with respect to strikes and lockouts in these sectors.
4. Providing relief for workmen in situations of layoff, retrenchment, closure et cetera.
5. Providing for tools of negotiation such as collective bargaining in situations of bipartite settlement.
6. Regulating the past, present, and future relations between the employers and the workmen.

There are four fundamental concepts of the ID Act which will be the focus of discussion of this article:

1. Definition of “appropriate government” under Section 2(a).
2. Definition of “industry” under Section 2(j).
3. Definition of “workmen” under Section 2(s).
4. Definition of “industrial dispute” under Section 2(k).

1. Appropriate Government

Section 2(a) is a lengthy Section; however, it can be understood in a simple manner as well. The Section talks about what would be the appropriate government in case of an industrial dispute, and the meaning of the Section is simply that when the industry is owned, established, controlled, and/or funded by the central government, then the appropriate government would be the central government, and if the previously mentioned things are done by the state government, then the appropriate government would be the state government. In case of industrial establishments which do not fall under either category, i.e. private industrial establishments, the appropriate government would be the state government.

The functions and powers of the appropriate government are as follows:

1. Refer the industrial dispute to the board, court, or tribunal under Section 10, or to arbitration under Section 10A. This function of the appropriate government carries with it an element of discretion as well, and principles of administrative law governing administrative discretion would be relevant here.
2. Constitute dispute resolution mechanisms such as Board of Conciliation, Industrial Tribunals, National Tribunals et cetera.
3. Enforce the order of settlement as per Section 17 and 17A as the labour court does not have power to enforce its own order and this has to be done by the appropriate government.
4. Transfer disputes from one court to another under Section 33B of the ID Act.
5. Make rules under Section 38 related to procedures and powers of Board, Tribunals, officers et cetera, salaries and allowances and so on. An example of this is the Industrial Dispute (Central Rules) 1957.
6. Provide its authority to the labour courts to take cognisance of a criminal offence under Section 34. It is the appropriate government which will initiate prosecution proceedings in the criminal court.
7. Grant permission under Chapter VB of the Act for lay-off, retrenchment, and closure.
8. Remove difficulties under Section 36A.
9. Exempt industrial establishments from the ID Act in accordance with the requirements given under Section 36B.
10. The appropriate government has the power to amend any of the five schedules as per Section 40.

2. Industry

The concept of “industry” is extremely important for ID Act because the ID Act is applicable only to industries as per Section 2(j), i.e. an industrial dispute can be raised only in case of industry. The industry has been defined as any business, trade, undertaking, manufacture or calling of employers and includes calling, service, employment, handicraft or industrial occupation or avocation of workers.

Section 2(j) is divided into two parts, one which is from the perspective of the employer, and the other which is from the perspective of the workman, and both parts have to be read together. Despite its immense importance, however, Section 2(j) is only illustrative in nature and does not give any test or formula to determine what is an industry. Due to this, the term has been interpreted in various landmark judgements which will be discussed now.

In D.N. Banerji v. P.R. Mukherjee[4] the municipality was held to be an industry, under the term “undertaking”. The argument that the word “undertaking” derives its meaning from the four other words in the first part of the definition was rejected, and therefore, municipalities and non-profit undertakings were considered to be industries.

In Corporation of City of Nagpur v. Employees[5] the issue was whether the corporation of Nagpur was an industry under the C.P. and Berar Industrial Disputes Settlement Act 1947, which defined industry differently. Here, instead of bringing municipality within “undertaking”, it was interpreted to be industry within “trade, business”. Here, the court made a distinction between regal and municipal functions and found that the corporation was analogous to business and not regal.

In State of Bombay v. Hospital Mazdoor Sabha[6] it was held that a hospital run by government comes within the meaning of “industry”. Further, profit motive and investment of capital were not considered to be necessary, and it was held that even if a hospital is being run by the government without profit, it would be covered under “industry”.

The Corporation of the city of Nagpur and Hospital Mazdoor Sabha cases were overruled by subsequent Supreme Court judgements which held that firm of solicitors[7], educational institutions[8], members’ clubs such as the Gymkhana Club[9], and charitable government hospitals[10] are not industries. These subsequent judgements were overruled and the Corporation of city of Nagpur and Hospital Mazdoor Sabha cases restored by the Bangalore Water Supply Case[11] wherein Justice Krishna Iyer gave the triple test for determining whether the establishment in question is an industry or not:

1. It should be a systematic activity.
2. It should be organised by cooperation between employer and employee
3. It should be for production and/or distribution of goods and services calculated to satisfy human wants and wishes.

The result was that professions, clubs, educational institutions, co-operatives, research institutions, charitable projects, and other similar activities if they fulfilled the triple test, would come under the definition of “industry”.

3. Workman

Section 2(s) defines “workman” and this definition is important because only a workman can raise an industrial dispute. As per the ID Act, workman includes an apprentice. The essential condition for being a workman is that the person must be employed in an industry, i.e. there must be a relationship between the employer and him as an employer and employee. Therefore, there must necessarily be a contract of service.

The “control test”, or its variations, is widely used to determine whether there was a contract of employment or not and whether the person can be said to be a workman. In Short v J.W. Henderson[12] the House of Lords gave four indicators of the contract of service:

1. The master’s power of selection of his servant
2. The payment of wages or other remuneration
3. The master’s right to control the method of doing the work
4. The master’s right of suspension or dismissal

In Dharangdhara Chemical Works v. State of Saurashtra[13]it was held that the test for determining employer-employee relationship is the existence of the right in the master to supervise and control the work done by the servant, not only in directing what work the servant is to do, but also the manner in which he shall do his work.

With respect to the difference between a worker and an independent contractor, the main point of difference is that while the worker himself agrees to work, the contractor agrees to get other persons to work. What determines whether a person is a workman or not depends on whether he has agreed to work personally or not. If he has agreed to work personally, then he would be considered to be a workman and the fact that he takes assistance from other persons would not affect his status.

In M/s Shining Tailors v. Industrial Tribunal II, U.P. Lucknow[14] it was held that payment on piece rate by itself does not disprove the master-servant relationship. On facts, the right to reject the work or refuse further work establish a master-servant relationship.

4. Industrial Dispute

From Section 2(k) of the ID Act, it is understood that there must be the following essential elements for a dispute to be considered an industrial dispute:

1. There must be dispute or difference.
2. The dispute must be between: (a. Employers and employers or, b. Employers and workmen or, c. Workmen and workmen.)
3. The dispute must be connected with the employment or with the conditions of labour of any person.

A landmark judgement in this respect is Dimakuchi Tea Estate Case[15] wherein the meaning and scope of “any person” as given in Section 2(k) was interpreted, and it was held that the expression “any person” occurring in the third part of the definition of an industrial dispute as given in Section 2(k) cannot mean anybody and everybody. The expression was held to mean a person who may not be a workman but he may be someone in whose employment, terms of employment or conditions of labour, the workmen as a class have a direct or substantial interest with whom they have, under the scheme of the Act, community of interest. This interpretation has been followed in numerous cases that followed the judgement.

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By – Nitya Bansal

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[1] A critical analysis on efficacy of mechanism to industrial disputes resolution in India, M.J.Arputharaj & R. Gayatri, International Journal of Current Research and Academic Review, Volume 2 Issue 8 2014, available at http://www.ijcrar.com/vol-2-8/M.J.Arputharaj and R. Gayatri.pdf.

[2] Id.

[3] Workmen of Dimakuchi Tea Estate v The Management of Dimakuchi Tea Estate, 1958 AIR 353.

[4] AIR 1953 SC 58.

[5] AIR 1960 SC 675.

[6] AIR 1960 SC 610.

[7] National Union of Commercial Employees v M.R. Meher, AIR 1962 SC 1980.

[8] University of Delhi v Ramnath AIR 1973 SC 1823.

[9] Madras Gymkhana Club Employees Union v Management of Madras Gymkhana Club, AIR 1968 SC 545.

[10] Safdarjung Hospital v Kuldip Singh, AIR 1970 SC 1407.

[11] Bangalore Water Supply and Sewerage Board v A Rajappa, AIR 1978 SC 548.

[12] (1946) AC 24 (HL).

[13] AIR 1957 SC264.

[14] (1983) 4 SCC 464.

[15] Supra Note 3.

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1. Development of Industrial Legislation in India
2. Jurisdiction under Code of Civil Procedure 1908